WeWork is on the verge of bankruptcy and plans to file for Chapter 11 bankruptcy in New Jersey, The Wall Street Journal has learned from sources.
Close supporters of the flexible workplace firm shouldn’t be shocked if WeWork does file. In August, WeWork issued a warning regarding “substantial doubt regarding the company’s ability to continue as a going concern” in its second-quarter financial report.
As the demand for its co-working spaces has gradually decreased over time, the company has been faced with a number of issues for years. Those issues worsened during the COVID-19 epidemic when businesses closed their physical locations and staff started working from home. The demand for WeWork space has not recovered to its pre-pandemic levels, despite the fact that some businesses have started operating again.
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WeWork was given 30 days to make up interest payments to its bondholders after it failed to do so earlier this month, as disclosed in a securities filing. On October 30, WeWork announced that as part of its efforts to “certain stakeholders in its capital structure” such as SoftBank and Goldman Sachs about improving its balance sheet it took steps “to rationalize its real estate footprint.”
The 13-year-old business reported a $397 million net loss on $877 million in revenue for the second quarter in August. Although revenue increased by 4% annually, WeWork interim CEO David Tolley stated in a statement at the time that “Excess supply in commercial real estate, increasing competition in flexible space and macroeconomic volatility drove higher member churn and softer demand than we anticipated, resulting in a slight decline in memberships.”
After hours today, the company’s stock fell more than 47%, closing at barely $1.21, a new 52-week low. In sharp contrast to the $47 billion valuation it attained after raising $1 billion in its SoftBank-led Series H round in January 2019, this gave the company a market cap of just $121 million.
